Chapter 3

TRADE IN SERVICES

CHAPTER III

TRADE IN SERVICES

Article 1

Scope and Definition

1. This Chapter applies to measures by the Parties affecting trade in services.

2. For the purposes of this Chapter, trade in services is defined as the supply of a service:

* from the territory of one Party into the territory of the other Party;

B. in the territory of one Party to the service consumer of the other Party;

C. by a service supplier of one Party, through commercial presence in the territory of the other Party;

D. by a service supplier of one Party, through presence of natural persons of a Party in the territory of the other Party.

3. For the purposes of this Chapter:

A. "measures by a Party" means measures taken by:

(i) central, regional or local governments and authorities; and

(ii) non-governmental bodies in the exercise of powers delegated by central, regional or local governments or authorities;

In fulfilling its obligations and commitments under this Chapter, each Party shall take such reasonable measures as may be available to it to ensure their observance by regional and local governments and authorities and non-governmental bodies within its territory;

B. "services" includes any service in any sector except services supplied in the exercise of governmental authority;

C. "a service supplied in the exercise of governmental authority" means any service which is supplied neither on a commercial basis, nor in competition with one or more service suppliers.

Article 2

Most-Favored-Nation Treatment

* With respect to any measure covered by this Chapter, each Party shall accord immediately and unconditionally to services and service suppliers of the other Party treatment no less favorable than that it accords to like services and service suppliers of any other country.

2. A Party may maintain a measure inconsistent with paragraph 1 provided that such a measure is listed in Listing of Article 2 Exemptions in Annex G.

* The provisions of this Chapter shall not be so construed as to prevent either Party from conferring or according advantages to adjacent countries in order to facilitate exchanges limited to contiguous frontier zones of services that are both locally produced and consumed.

Article 3

Economic Integration

* This Chapter shall not apply to advantages accorded by either Party by virtue of such Party's membership in, or having entered into, an agreement liberalizing trade in services between or among the parties to such an agreement, provided that such an agreement:

A. has substantial sectoral coverage, (2) and

B. provides for the absence or elimination of substantially all discrimination, in the sense of Article 7, between or among the parties, in the sectors covered under subparagraph (A), through:

i) elimination of existing discriminatory measures, and/or

ii) prohibition of new or more discriminatory measures,

either at the entry into force of that agreement or on the basis of a reasonable time-

frame, except for measures permitted under Articles 1, 2, and 3 of Chapter VII.

2. A service supplier of any Party that is a juridical person constituted under the laws of a party to an agreement referred to in paragraph 1 shall be entitled to treatment granted under such agreement, provided that it engages in substantive business operations in the territory of the parties to such agreement.

Article 4

Domestic Regulation

1. In sectors where specific commitments are undertaken, each Party shall ensure that all measures of general application affecting trade in services are administered in a reasonable, objective and impartial manner.

2. A. Each Party shall maintain or institute as soon as practicable judicial, arbitral or administrative tribunals or procedures which provide, at the request of an affected service supplier, for the prompt review of, and where justified, appropriate remedies for, administrative decisions affecting trade in services. Where such procedures are not independent of the agency entrusted with the administrative decision concerned, the Party shall ensure that the procedures in fact provide for an objective and impartial review.

o The provisions of subparagraph A shall not be construed to require a Party to institute such tribunals or procedures where this would be inconsistent with its constitutional structure or the nature of its legal system.

* Where authorization is required for the supply of a service on which a specific commitment has been made, the competent authorities of a Party shall, within a reasonable period of time after the submission of an application considered complete under domestic laws and regulations, inform the applicant of the decision concerning the application. At the request of the applicant, the competent authorities of the Party shall provide, without undue delay, information concerning the status of the application.

4. A. The Party shall not apply licensing and qualification requirements and technical standards that nullify or impair such specific commitments in a manner which:

(i) does not comply with the following criteria:

(a) such requirements or standards shall be based on objective and transparent criteria, such as competence and the ability to supply the service;

(b) such requirements or standards shall not be more burdensome than necessary to ensure the quality of the service;

(c) in the case of licensing procedures, they shall not in themselves be a restriction on the supply of the service.

(ii) could not reasonably have been expected of that Party at the time the specific commitments in those sectors were made.

o In determining whether a Party is in conformity with the obligation under sub-paragraph 4.A, account shall be taken of international standards of relevant international organizations (3) applied by that Party.

5. In sectors where specific commitments regarding professional services are undertaken, each Party shall provide for adequate procedures to verify the competence of professionals of the other Party.

Article 5

Monopolies and Exclusive Service Suppliers

1. Each Party shall ensure that any monopoly supplier of a service in its territory does not, in the supply of the monopoly service in the relevant market, act in a manner inconsistent with that Party's obligations under Article 2 and specific commitments.

2. Where a Party's monopoly supplier competes, either directly or through an affiliated company, in the supply of a service outside the scope of its monopoly rights and which is subject to that Party's specific commitments, the Party shall ensure that such a supplier does not abuse its monopoly position to act in its territory in a manner inconsistent with such commitments.

3. The provisions of this Article shall also apply to cases of exclusive service suppliers, where a Party, formally or in effect, (a) authorizes or establishes a small number of service suppliers and (b) substantially prevents competition among those suppliers in its territory.

Article 6

Market Access

1. With respect to market access through the modes of supply identified in Article 1, each Party shall accord services and service suppliers of the other Party treatment no less favorable than that provided for under the terms, limitations and conditions agreed and specified in its Schedule in Annex G. (4)

2. In sectors where market-access commitments are undertaken, the measures which a Party shall not maintain or adopt either on the basis of a regional subdivision or on the basis of its entire territory, unless otherwise specified in its Schedule, are defined as:

* limitations on the number of service suppliers whether in the form of numerical quotas, monopolies, exclusive service suppliers or the requirements of an economic needs test;

B. limitations on the total value of service transactions or assets in the form of numerical quotas or the requirement of an economic needs test;

* limitations on the total number of service operations or on the total quantity of service output expressed in terms of designated numerical units in the form of quotas or the requirement of an economic needs test; (5)

D. limitations on the total number of natural persons that may be employed in a particular service sector or that a service supplier may employ and who are necessary for, and directly related to, the supply of a specific service in the form of numerical quotas or the requirement of an economic needs test;

E. measures which restrict or require specific types of legal entity or joint venture through which a service supplier may supply a service; and

F. limitations on the participation of foreign capital in terms of maximum percentage limit on foreign shareholding or the total value of individual or aggregate foreign investment.

Article 7

National Treatment

* In the sectors inscribed in its Schedule in Annex G, and subject to any conditions and qualifications set out therein, each Party shall accord to services and service suppliers of the other Party, in respect of all measures affecting the supply of services, treatment no less favorable than that it accords to its own like services and service suppliers. (6)

2. A Party may meet the requirement of paragraph 1 by according to services and service suppliers of the other Party, either formally identical treatment or formally different treatment to that it accords to its own like services and service suppliers.

3. Formally identical or formally different treatment shall be considered to be less favorable if it modifies the conditions of competition in favor of services or service suppliers of the Party compared to like services or service suppliers of the other Party.

Article 8

Additional Commitments

The Parties may negotiate commitments with respect to measures affecting trade in services not subject to scheduling under Articles 6 or 7, including those regarding qualifications, standards or licensing matters. Such commitments shall be inscribed in a Party's Schedule.

Article 9

Schedules of Specific Commitments

1. Each Party shall set out in Annex G the specific commitments it undertakes under Articles 6 and 7 of this Chapter. With respect to sectors where such commitments are undertaken, such Annex shall specify:

o terms, limitations and conditions on market access;

B. conditions and qualifications on national treatment;

* undertakings relating to additional commitments;

D. where appropriate the time-frame for implementation of such commitments; and

E. the date of entry into force of such commitments.

2. Measures inconsistent with both Articles 6 and 7 shall be inscribed in the column relating to Article 6. In this case the inscription will be considered to provide a condition or qualification to Article 7 as well.

3. Schedules of specific commitments shall be annexed to this Chapter and shall form an integral part thereof.

Article 10

Denial of Benefits

A Party may deny the benefits of this Chapter:

* to the supply of a service, if it establishes that the service is supplied from or in the territory of a non-Party;

2. in the case of the supply of a maritime transport service, if applicable, if it establishes that the service is supplied:

A. by a vessel registered under the laws of a non-Party, and

B. by a person which operates and/or uses the vessel in whole or in part but which is of a non-Party;

3. to a service supplier that is a juridical person, if it establishes that it is not a service supplier of the other Party.

Article 11

Definitions

For the purpose of this Chapter and Annex G:

1. "measure" means any measure by a Party, whether in the form of a law, regulation, rule, procedure, decision, administrative action, or any other form;

2. "supply of a service" includes the production, distribution, marketing, sale and delivery of a service;

3. "measures by a Party affecting trade in services" include measures in respect of

o the purchase, payment or use of a service;

o the access to and use of, in connection with the supply of a service, services which are required by a Party to be offered to the public generally;

o the presence, including commercial presence, of persons of a Party for the supply of a service in the territory of another Party;

* "commercial presence" means any type of business or professional establishment, including through

o the constitution, acquisition or maintenance of a juridical person, or

o the creation or maintenance of a branch or a representative office,

within the territory of a Party for the purpose of supplying a service;

* "sector" of a service means,

o with reference to a specific commitment, one or more, or all, subsectors of that service, as specified in a Party's Schedule,

o otherwise, the whole of that service sector, including all of its subsectors;

* "service of the other Party" means a service which is supplied,

o from or in the territory of that other Party, or in the case of maritime transport, by a vessel registered under the laws of that other Party, or by a person of that other Party which supplies the service through the operation of a vessel and/or its use in whole or in part; or

o in the case of the supply of a service through commercial presence or through the presence of natural persons, by a service supplier of that other Party;

* "service supplier" means any person that supplies a service; (7)

* "monopoly supplier of a service" means any person, public or private, which in the relevant market of the territory of a Party is authorized or established formally or in effect by that Party as the sole supplier of that service;

* "service consumer" means any person that receives or uses a service;

* "person" means either a natural person or a juridical person;

* "natural person of the other Party" means a natural person who resides in the territory of that other Party, and who under the law of that other Party:

o is a national of that other Party; or

o has the right of permanent residence in that other Party, in the case of a Party which:

+ does not have nationals; or

ii) accords substantially the same treatment to its permanent residents as it does to its nationals in respect of measures affecting trade in services;

12. "juridical person" means any legal entity duly constituted or otherwise organized under applicable law, whether for profit or otherwise, and whether privately-owned or governmentally-owned, including any corporation, trust, partnership, joint venture, sole proprietorship or association;

13. "juridical person of the other Party" means a juridical person which is either:

A. constituted or otherwise organized under the law of the other Party, and is engaged in substantive business operations in the territory of that Party; or

B. in the case of the supply of a service through commercial presence, owned or controlled by:

i) natural persons of that Party; or

ii) juridical persons of that other Party identified under subparagraph (i);

14. a juridical person is:

o "owned" by persons of a Party if more than 50 per cent of the equity interest in it is beneficially owned by persons of that Party;

o "controlled" by persons of a Party if such persons have the power to name a majority of its directors or otherwise to legally direct its actions;

o "affiliated" with another person when it controls, or is controlled by, that other person; or when it and the other person are both controlled by the same person;

15. "company" means any entity constituted or organized under applicable law, whether or not for profit, and whether privately or governmentally owned or controlled, and includes a corporation, trust, partnership, sole proprietorship, branch, joint venture, association, or other organization;

16. "enterprise" means a company.

Notes:

2. This condition is understood in terms of number of sectors, volume of trade affected and modes of supply. In order to meet this condition, agreements should not provide for the a priori exclusion of any mode of supply.

3. The term "relevant international organizations" refers to international bodies whose membership is open to the relevant bodies of at least all Members of the WTO.

4. If a Party undertakes a market-access commitment in relation to the supply of a service through the mode of supply referred to in subparagraph 2(A) of Article 1 and if the cross-border movement of capital is an essential part of the service itself, that Party is thereby committed to allow such movement of capital. If a Party undertakes a market-access commitment in relation to the supply of a service through the mode of supply referred to in subparagraph 2(C) of Article 1, it is thereby committed to allow related transfers of capital into its territory.

5. Subparagraph 2(C) does not cover measures of a Party which limit inputs for the supply of services.

6. Specific commitments assumed under this Article shall not be construed to require either Party to compensate for any inherent competitive disadvantages which result from the foreign character of the relevant services or service supplier.

7. Where the service is not supplied directly by a juridical person but through other forms of commercial presence such as a branch or a representative office, the service supplier (i.e. the juridical person) shall, nonetheless, through such presence be accorded the treatment provided for service suppliers under this Chapter. Such treatment shall be extended to the presence through which the service is supplied and need not be extended to any other parts of the supplier located outside the territory where the service is supplied.